'Dark net' drug deals boom on cyber Silk Road

Underground online drug marketplace Silk Road is doing an estimated $22 million a year in sales but, in light of evidence of its growing popularity among Australians, police and customs officials are starting to crack down.

Silk Road - started by "Dread Pirate Roberts" in February last year - functions like a black market version of eBay, complete with vendor feedback, dispute resolution and sales promotions. Cocaine and ecstasy sell for a quarter of Australian street prices, while other drugs such as cannabis and prescription medication are also shipped worldwide.

Silk Road is the Amazon of the drug trade.

The Australian Federal Police recently arrested a Melbourne man for allegedly importing drugs into Australia via Silk Road, which operates in the so-called "dark net" or "hidden web". He was charged with 10 offences relating to the importation, trafficking and possession of narcotics and prohibited weapons, and is due to appear in Melbourne Magistrates Court on October 24.

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In May the AFP and Customs seized 120 kilograms of illicit substances imported into Australia via the postal system during a three-month targeted operation. They arrested 25 people around the country. Another 12 people were arrested in Mount Isa in Queensland in June, also for importing drugs through the postal system.

In June this year Customs foiled an attempt to smuggle nine packages of drugs into Australia within DVD cases.

The AFP is so concerned about the number of Australians using the site that it recently made a joint announcement with Customs warning Silk Road users "their identity will not always remain anonymous and when caught, they will be prosecuted".

But Nigel Phair, a former cyber cop turned computer security consultant, who has just secured funding from the National Drug Law Enforcement Research Fund to look into the online drugs trade, says police need to make huge changes if they are going to make a dent in the problem.

Carnegie Mellon computer security professor Nicolas Christin spent more than six months performing daily analysis of Silk Road for a research paper. He found that use of the site has been growing and the total revenue made by its over 500 active sellers was about $US1.9 million per month, while $US143,000 a month goes to the operators of the site as commission.

Christin estimates there are up to 150,000 customers of Silk Road who bought 24,422 items between February 3 and July 24 this year. Cannabis is the most popular item on the site, and despite the anonymity underpinning the service and lack of legal recourse if you get ripped off, Christin found that for 96.5 per cent of items buyers left a five out of five feedback rating.

Those who buy from Silk Road run the risk of Customs intercepting their package but many are happy to take that chance.

There is evidence that the site is increasingly popular with Australians, according to National Drug Research Institute research fellow Monica Barratt, who told Fairfax Media recently that it highlighted the futility of trying to stamp out drugs through law enforcement. "Drug use and the demand for drug use isn't changing, so if for some reason Silk Road is suppressed or removed, there will just be another supply channel pop up," she said.

Users can only access the service using software called Tor, which purports to offer online anonymity by masking the user's location and identifying details. Payment is made using the encrypted - but volatile - digital currency Bitcoin.

"There is a perception among many law enforcement and regulatory agencies that it is all too hard to conduct investigations involving Tor, so never start," said Phair.

"There needs to be much more training of general investigators in conducting technical lines of inquiry, including the purchase of forensic discovery equipment if we [as a jurisdiction] are going to make a dent in this problem."

But since drugs are delivered by the post, anyone who uses Silk Road runs the risk of their parcel being intercepted by Customs and Border Protection and the AFP.

It is not clear how many of the billions of parcels handled by Australia Post get scanned each year and Christin found that most sellers use techniques to make package inspection unlikely, such as vacuum sealing or "professional looking" envelopes with typed destination addresses. But police believe they are making a difference.

While it is not an offence to access the Silk Road website, the AFP said anyone who imported border controlled drugs faced a maximum penalty of life imprisonment and/or a $825,000 fine.

"Criminals are attempting to exploit the international mail system through online networks, but the recent arrest demonstrates that we are one step ahead of them," said AFP manager crime operations Peter Sykora.

"The AFP will continue to identify, investigate and prosecute individuals or groups importing narcotics into Australia, including via illicit e-commerce platforms such as Silk Road."

Alana Sullivan, acting national manager in the Customs cargo and maritime targeting branch, said Customs monitored illicit e-commerce platforms including Silk Road and was aware of the Australian presence on the site as both sellers and buyers.

"Persons who buy or sell through online marketplaces on so-called 'anonymous' networks should understand that they are not guaranteed anonymity," Sullivan said.

But it is understood that authorities have difficulty identifying the source websites linked to seizures (such as Silk Road) due to the fact that intercepted parcels often do not have identifying features.

Police rely on finding documentary or forensic evidence to link a seizure to a particular site, or an admission by the offender on arrest, which is not always forthcoming.

US authorities have shut down another anonymous drug trade site, the Farmer's Market, and in April indicted its eight owners. Farmer's Market was much smaller than Silk Road is now, doing about $1 million in sales between January 2007 and October 2009. It also used less-than-anonymous PayPal and Western Union for payment as opposed to the encrypted Bitcoins.

But Phair, whose report on the online drug trade will be completed in 12 months, said he believed "the problem will continue to grow as it is perceived as a safe and secure method to buy and sell illicit drugs".

The AFP says it does not have jurisdiction to investigate websites based overseas, so it is unlikely to be able to shut down Silk Road.

It said it could refer matters for investigation to overseas counterparts but could not compel them to act.

Asher Moses is the Technology Editor for Fairfax Media. He started his own gadget review website more than a decade ago at age 14 and has since written for most of Australia's leading technology publications. He has twice been named Young Australian Online Journalist of the Year by the Walkley Foundation.